Charity Chat March 2016

David Porter continues his series of blogs with the aims of ‘Charity Chat’ to make Trustees, Directors, Governors and Committee Members (the Trustees) aware of their obligations and the processes that have to be followed to run the Charity correctly. The references I make are to the Charities Act 2011 (the Act) unless stated to the contrary. If there are matters you wish to raise please let me know.

Constitutions

I am constantly surprised at how few Trustees read their charity’s constitution. They appear to rely on the existing trustees, whom they believe know what they are doing. In fact many of the existing Trustees haven’t read their constitution either.

Forms of Constitutions

Constitutions can take many forms and frequently contain very different terms.

An informal written constitution setting out the terms on which the monies paid to the charity can be used and how that can be done.

A Trust Deed. This is usually in the form of a declaration by the Donor of the terms on which he/she or the company wish the monies given to be used.

More formal Memorandum and Articles for a Company Limited by Guarantee. This is a format with which commercial businessmen will be more familiar.

A Charitable Incorporated Organisation which will be either for a ‘Foundation’ or an ‘Association’ and is a company supervised by the Charity Commission and means that Companies House will not be involved.

Objects

Whatever forms the constitutions take they will all specify what the objects of the charity are. The constitutions may limit the charitable activities to a given area or group of people. If grants are made or money expending outside that area or those people, then the payments will be in breach of trust and there could be a liability on those Trustees, who made the payments, to refund them.

It might be that the trust was set up for a specific purpose, but that that purpose can no longer be fulfilled and the charity has continued, but made payments and been involved with matters, which were near to what was originally intended. Again, this could be in breach of trust. The way to deal with that would be to contact the Charity Commission under the ‘Cy-Pres’ rules to obtain agreement for the funds to be used for their current manner.

Members, Trustees and meetings

The constitution will also identify who can be members, their number and the way they can be appointed and dismissed. There will be similar provisions for the Trustees.

Processes will be provided as to how meetings are to be run, who can vote and whether the chair has a casting vote. This latter power might be very important where the voting is equal and might well enable the charity to take action, which it might not otherwise have been able to do.

It is worth noting that where the charity is run as a company it has to send out proxy notices for all meetings and it is a criminal offence not to do so.(See sections 325 (3) and (4) Companies Act 2006).

Changes and termination

The constitution will identify whether changes can be made to the constitution and what is to happen on dissolution. Usually the clause requires the assets to be passed to another charity with similar objects. If that can’t be done then you would need to ask the Charity Commission to advise.